Good News and Bad Regarding that ‘Fiscal Cliff’

Regardless of your party affiliation, there is good news and bad news as Democrats and Republicans in Washington bargain to avoid the so-called fiscal cliff come January.

The good news is that both sides have finally put substantive proposals on the table, a necessary first step to replace the bloviating that has kept talks from becoming fruitful.

The bad news is there are bad proposals that should never have seen the light of day. Being familiar with such negotiations, we are hopeful some of the more damaging ideas are intended to be thrown away early on, as bargainers get down to serious business.

Of concern, in President Obama’s proposal, is the suggestion that the 2-percent Social Security tax holiday be extended. While the added $1,000 a year (on average) is welcome revenue for beleaguered taxpayers, the longer the holiday persists, the more it will be expected to become permanent — something Social Security cannot afford. Thankfully, the president appears to open to an alternative (yet unspecified) form of relief.

On health care, both sides appear to be proposing changes which don’t really address overspending. Instead, they shuttle part of the Medicare/Medicaid bill to health care providers by lowering payment rates and raising deductibles for beneficiaries. While the latter may be appropriate in some cases, cutting what the government pays to health care providers will simply encourage doctors to stop accepting Medicare patients.

Among the most troublesome proposals is one by Republicans to cut increasing Social Security cost of living.

They argue the current use of the Consumer Price Index overstates inflation. Instead, negotiators suggest using the “chained CPI” that, on average, is 0.3 percentage points less than the current measure, as explained by a recent Associated Press report.

In layman’s terms, we are told the “chained CPI” accounts for lifestyle changes we, as consumers, make as prices rise. For example, as steak becomes cost prohibitive, we buy and consume more chicken.

Unfortunately, there are many fallacies in this argument. One is that many of us are currently buying steak and can simply move to chicken. With the economy having been in shambles for so long, some of us are at the beans-and-franks stage and looking at something no more costly than Ramen noodles. Where to go from the noodles is a problem.

But, a greater and more serious problem is that the current CPI is unrealistic, and we would argue doesn’t keep up with the real cost of living for many Americans. This is especially true for senior citizens who are locked into above-average medical bills simply because they are older than the national demographic average. For them, the statistics behind the CPI don’t tell an accurate story.

Also troubling, among the many proposals being offered to avoid the fiscal cliff, is a request by the president to be granted the authority to raise the federal debt limit as he sees fit, without the approval of Congress.

It is hopefully inconceivable the GOP will agree to give the president carte blanche. Among the critical powers in our checks-and-balances system of government is the ability of Congress to control the nation’s purse strings. As with any American family, the person with the purse/wallet is the one who holds the power. So, too, is it in Washington.

Some may argue such control is more ceremonial, given Congress still has to approve a federal budget. But transferring this power to the president, if nothing else, hides the growing debt from public view (currently set at $16.4 billion). It denies voters just one more sign the nation is in deep financial trouble.